Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2010
[ ] TRANISITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 000-54073
LIBERTY COAL ENERGY CORP.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 75-3252264
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
99 18th Street, Suite 3000 Denver, Colorado 80202
(Address of Principal Executive Offices) (Zip Code)
(303) 997-3161
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [ ] YES [ ] NO
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
57,900,000 common shares issued and outstanding as of February 11, 2011
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits 21
SIGNATURES 22
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our unaudited interim financial statements for the three month period ended
December 31, 2010 form part of this quarterly report. They are stated in United
States Dollars (US$) and are prepared in accordance with United States generally
accepted accounting principles.
3
LIBERTY COAL ENERGY CORP.
(formerly ESL Teachers Inc.)
(An Exploration Stage Company)
BALANCE SHEETS
December 31, September 30,
2010 2010
---------- ----------
(unaudited) (unaudited)
ASSETS
Current asset
Cash and bank accounts $ 26,046 $ 59,190
Prepaid expenses 4,374 5,291
---------- ----------
Total current assets 30,420 64,481
Website, net of amortization 2,956 3,378
Mineral Properties 350,000 350,000
---------- ----------
Total assets $ 383,376 $ 417,859
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 12,922 $ 18,590
---------- ----------
Total liabilities 12,922 18,590
---------- ----------
Stockholders' equity
Common stock authorized -
1,500,000,000 common shares with a par value of $0.001
Common stock issued and outstanding
57,900,000 common shares 57,900 57,900
Additional paid-in capital 346,786 346,786
Additional paid-in capital - warrants 183,314 183,314
Deficit accumulated during the exploration stage (217,546) (188,731)
---------- ----------
Total stockholders' equity 370,454 399,269
---------- ----------
Total liabilities and stockholders' equity $ 383,376 $ 417,859
========== ==========
The accompanying notes are an integral part of these financial statements.
4
LIBERTY COAL ENERGY CORP.
(formerly ESL Teachers Inc.)
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS (unaudited)
Cumulative
Amounts From
Date of
Three Months Three Months Incorporation on
Ended Ended August 31, 2007 to
December 31, December 31, December 31,
2010 2009 2010
------------ ------------ ------------
REVENUE $ -- $ -- $ --
------------ ------------ ------------
OPERATING EXPENSES
General & Administrative 845 1,013 19,245
Consulting 15,000 -- 75,000
Amortization 422 -- 844
Investor Relations 8,286 -- 30,402
Transfer Agent -- 1,595 14,309
Legal and Accounting 4,282 500 77,746
------------ ------------ ------------
Loss before income taxes (28,815) (3,108) (217,546)
Provision for income taxes -- -- --
------------ ------------ ------------
Net loss $ (28,815) $ (3,108) $ (217,546)
============ ============ ============
Basic and diluted loss per Common share (1) (1) (1)
============ ============
Weighted average number of common shares
outstanding (Note 5) 57,900,000 73,800,000
============ ============
----------
(1) less than $0.01
The accompanying notes are an integral part of these financial statements.
5
LIBERTY COAL ENERGY CORP.
(formerly ESL Teachers Inc.)
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (unaudited)
Deficit
Additional Accumulated
Common Stock Additional Paid-in During the Total
--------------------- Paid in Capital Exploration Stockholders'
Shares Amount Capital Warrants Stage Equity
------ ------ ------- -------- ----- ------
Inception, August 31, 2007 -- $ -- $ -- $ -- $ -- $ --
Initial sale of common stock 45,000,000 45,000 (30,000) -- -- 15,000
Net loss for the year -- -- -- -- (4,158) (4,158)
----------- ------- -------- -------- --------- --------
Balance September 30, 2007 45,000,000 45,000 (30,000) -- (4,158) 10,842
Private placement on May 31,
2008 at $0.05 per share 28,800,000 28,800 19,200 -- -- 48,000
Net loss for the period -- -- -- -- (31,673) (31,673)
----------- ------- -------- -------- --------- --------
September 30, 2008 73,800,000 73,800 (10,800) -- (35,831) 27,169
Net loss for the period -- -- -- -- (22,552) (22,552)
----------- ------- -------- -------- --------- --------
September 30, 2009 73,800,000 73,800 (10,800) -- (58,383) 4,617
Private placement on February 1,
2010 at $0.25 per unit 1,000,000 1,000 157,343 91,657 -- 250,000
Stock issued with respect to
property acquisition 100,000 100 40,700 -- -- 40,800
Private placement on February 11,
2010 at $0.25 per unit 1,000,000 1,000 157,343 91,657 -- 250,000
Cancellation of stock (18,000,000) (18,000) 18,000 -- -- --
Net loss for the period -- -- -- -- (130,348) (130,348)
----------- ------- -------- -------- --------- --------
September 30, 2010 57,900,000 57,900 346,786 183,314 (188,731) 399,269
Net loss for the period -- -- -- -- (28,815) (28,815)
----------- ------- -------- -------- --------- --------
December 31, 2010 57,900,000 $57,900 $346,786 $183,314 $(217,546) $370,454
========== ======= ======== ======== ========= ========
The accompanying notes are an integral part of these financial statements.
6
LIBERTY COAL ENERGY CORP.
(formerly ESL Teachers Inc.)
(An Exploration Company)
STATEMENTS OF CASH FLOWS (unaudited)
Cumulative
Amounts From
Date of
Three Months Three Months Incorporation on
Ended Ended August 31, 2007 to
December 31, December 31, December 31,
2010 2009 2010
---------- ---------- ----------
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss for the period $ (28,815) $ (3,108) $ (217,546)
Adjustment for non-cash items:
Amortization 422 -- 844
(Increase) Decrease in prepaid expenses 917 445 (4,374)
Increase (Decrease) in accounts payable and
accrued liabilities (5,668) (3,150) 12,922
---------- ---------- ----------
Net cash used in operating activities (33,144) (5,813) (208,154)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- -- 563,000
---------- ---------- ----------
Net cash used in financing activities -- -- 563,000
---------- ---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITY
Investment in website -- -- (3,800)
Acquisition of mineral properties -- -- (325,000)
---------- ---------- ----------
Net cash used in financing activities -- -- (328,800)
---------- ---------- ----------
Change in cash during the period (33,144) (5,813) 26,046
Cash, beginning of the period 59,190 17,430 --
---------- ---------- ----------
Cash, end of the period $ 26,046 $ 11,617 $ 26,046
========== ========== ==========
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS:
Cash paid for income taxes $ -- $ -- $ --
========== ========== ==========
Cash paid for interest $ -- $ -- $ --
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
7
LIBERTY COAL ENERGY CORP.
(formerly ESL Teachers Inc.)
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
Liberty Coal Energy Corp. (the "Company") was incorporated in the state of
Nevada on August 31, 2007 to develop business activities in teacher recruiting.
The Company changed its business focus in March, 2010 and now intends to enter
the business of coal exploration, development, and production. The Company has
not yet commenced significant business operations and is considered to be in the
exploration stage (formerly in the development stage).
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT CERTIFICATION
The financial statements herein are certified by the officers of the Company to
present fairly, in all material respects, the financial position, results of
operations and cash flows for the periods presented in conformity with
accounting principles generally accepted in the United States of America,
consistently applied.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and amounts due to Company
stockholder.
The carrying amount of these financial instruments approximates fair value due
either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these financial statements. It is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from its other financial instruments and that
their fair values approximate their carrying values except where separately
disclosed.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although the Company has taken steps to
verify title to mineral properties in which it has an interest, these procedures
do not guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
8
LOSS PER SHARE
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. No provision for income taxes is
included in the statement due to its immaterial amount, net of the allowance
account, based on the likelihood of the Company to utilize the loss
carry-forward. See Note 5.
NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding and common stock equivalents, if not anti-dilutive.
The Company has not issued any potentially dilutive common shares.
RECENTLY ADOPTED PRONOUNCEMENTS
VARIABLE INTEREST ENTITIES
In June 2009, the FASB issued changes to require an enterprise to perform an
analysis to determine whether the enterprise's variable interest or interests
give it a controlling financial interest in a variable interest entity; to
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity; to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity; to add an additional reconsideration event for
determining whether an entity is a variable interest entity when any changes in
facts and circumstances occur such that holders of the equity investment at
risk, as a group, lose the power from voting rights or similar rights of those
investments to direct the activities of the entity that most significantly
impact the entity's economic performance; and to require enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprise's involvement in a variable interest entity. The
guidance became effective for the Company on February 1, 2010. The adoption of
the guidance did not have an impact on the Company's consolidated financial
statements.
CODIFICATION OF GAAP
In June 2009, the FASB issued guidance to establish the Accounting Standards
Codification TM ("Codification") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards
Updates ("ASU"). ASUs will not be authoritative in their own right as they will
only serve to update the Codification. The issuance of SFAS 168 and the
Codification does not change GAAP. The guidance became effective for the Company
for the period ending October 31, 2009. The adoption of the guidance did not
have an impact on the Company's consolidated financial statements.
9
SUBSEQUENT EVENTS
On July 31, 2009, the Company adopted changes issued by the FASB that
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. Specifically, the guidance sets forth the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. The
Company has evaluated subsequent events through the date the financial
statements were issued.
BUSINESS COMBINATIONS
The Company adopted the changes issued by the FASB that requires the acquiring
entity in a business combination to recognize all (and only) the assets acquired
and liabilities assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose additional information needed to
evaluate and understand the nature and financial effect of the business
combination.
The Company also adopted the changes issued by the FASB which requires assets
and liabilities assumed in a business combination that arise from contingencies
be recognized on the acquisition date at fair value if it is more likely than
not that they meet the definition of an asset or liability; and requires that
contingent consideration arrangements of the target assumed by the acquirer be
initially measured at fair value.
The guidance is effective for the Company's acquisitions occurring on or after
February 1, 2009. The Company applied these new provisions to two acquisitions
that occurred during the year, Rock Coast Media, Inc. and Pixel Bridge, Inc.
These acquisitions are more fully disclosed in Note 5 in our Consolidated
Financial Statements.
NON-CONTROLLING INTERESTS
In December 2007, the FASB issued changes to establish accounting and reporting
standards for all entities that prepare consolidated financial statements that
have outstanding non-controlling interests, sometimes called minority interest.
These standards require that ownership interests in subsidiaries held by outside
parties be clearly identified, labeled and presented in equity separate from the
parent's equity; the amount of net income attributable to the parent and the
non-controlling interest be separately presented on the consolidated statement
of income; accounting standards applied to changes in a parent's interest be
consistently applied; fair value measurement upon deconsolidation of a
non-controlling interest be used; and the interests of the non-controlling
owners be already identified and distinguished. The adoption of this guidance
had no impact on the Company's consolidated financial statements.
INTANGIBLE ASSETS
In April 2008, the FASB adopted changes to require companies estimating the
useful life of a recognized intangible asset to consider their historical
experience in renewing or extending similar arrangements or, in the absence of
historical experience, to consider assumptions that market participants would
use about renewal or extension as adjusted for entity-specific factors. The
guidance is effective for fiscal years beginning after December 15, 2008 and is
to be applied prospectively to intangible assets whether acquired before or
after the effective date. The Company adopted the guidance on February 1, 2009.
The adoption had no impact on the Company's consolidated financial statements.
10
HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")
In May 2008, the FASB issued changes to identify the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP (the GAAP hierarchy). The guidance is
effective 60 days following the SEC's approval of the Public Company Accounting
Oversight Board amendments to AU section 411, THE MEANING OF PRESENT FAIRLY IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Management is
currently evaluating the guidance and assessing the impact, if any, on the
Company's consolidated financial statements.
REVENUE RECOGNITION
In September 2009, the FASB issued new revenue recognition guidance on multiple
deliverable arrangements. It updates the existing multiple-element revenue
arrangements guidance currently included under the Accounting Standards
Codification ("ASC") 605-25. The revised guidance primarily provides two
significant changes: 1) eliminates the need for objective and reliable evidence
of the fair value for the undelivered element in order for a delivered item to
be treated as a separate unit of accounting, and 2) requires the use of the
relative selling price method to allocate the entire arrangement consideration.
In addition, the guidance also expands the disclosure requirements for revenue
recognition. ASU 2009-13 will be effective for the first annual reporting period
beginning on or after fiscal 2011, with early adoption permitted provided that
the revised guidance is retroactively applied to the beginning of the year of
adoption. Management is currently evaluating the impact of adopting this
guidance on the Company's consolidated financial statements.
RECLASSIFICATIONS
Certain balances in the prior years have been reclassified to conform to the
current year presentation.
NOTE 3 - MINERAL PROPERTIES
CAMPBELL PROPERTY
On February 1, 2010 the Company entered into, and closed, a Mineral and Mining
Lease with Miller and Associates, LLC. Pursuant to this agreement, the Company
issued 100,000 (post split) shares of its common stock to Miller and Associates,
LLC and acquired a 5 year lease on certain mining claims in the state of
Wyoming. In addition to the 100,000 (post split) shares issued, the Company
agreed to pay an annual fee of US $20,000, adjusted for inflation, as well as a
production royalty of 4% on the gross sales of product produced by the mineral
claims considered by this agreement.
SHERIDAN PROPERTY
The Company acquired a mineral property leasehold interest in exchange for
$55,000 (paid), $25,000 within 90 days of the each of the next three following
anniversaries of the date of the Agreement. Additionally, the Company must spend
$2,750,000 on development of the property within three years of the date of the
Agreement. Additionally, the lessor would receive a royalty of $1 per ton of
coal produced from the property and sold with a maximum of $5,000,000. The
maximum amount of royalty must be paid within 15 years of the date of the
Agreement.
11
NOTE 4 - CAPITAL STOCK
The company has 1,500,000,000 common shares authorized at a par value of $0.001
per share.
On August 31, 2007, the company issued 1,500,000 common shares to founders for
total proceeds of $15,000.
On May 31, 2008, the company completed a private placement whereby it issued
960,000 common shares at $0.05 per share for total proceeds of $48,000.
On February 1, 2010, the company completed a private placement whereby it issued
1,000,000 units for $0.25 per unit. Each unit consists of one common share and
common share purchase warrant allowing the holder to purchase a common share at
$0.25 per share expiring February 1, 2012.
On February 1, 2010, the company issued 100,000 common shares as partial
consideration to acquire the Campbell Property.
On February 11, 2010, the company completed a private placement whereby it
issued 1,000,000 units for $0.25 per unit. Each unit consists of one common
share and common share purchase warrant allowing the holder to purchase a common
share at $0.25 per share expiring February 1, 2012.
On March 15, 2010, the Company increased its authorized common shares from
50,000,000 shares to 1,500,000,000 shares and effected a 30 for 1 forward stock
split. All share amounts reflected in the financial statements have been
adjusted to reflect the results of the stock split.
On March 20, 2010, the Company cancelled 18,000,000 of its common stock
outstanding.
WARRANTS
Outstanding at
Issue Date Number Price Expiry Date September 30, 2010
---------- ------ ----- ----------- ------------------
February 1, 2010 1,000,000 $0.25 February 1, 2012 1,000,000
February 11, 2010 1,000,000 $0.25 February 11, 2012 1,000,000
NOTE 6 - INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect currently.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. In the Company's opinion, it is
uncertain whether they will generate sufficient taxable income in the future to
fully utilize the net deferred tax asset. Accordingly, a valuation allowance
equal to the deferred tax asset has been recorded.
The cumulative net operating loss carry-forward is approximately $217,546 at
December 31, 2010, and will expire beginning in the year 2028.
12
The cumulative tax effect at the expected rate of 22% of significant items
comprising our net deferred tax amount is as follows:
December 31, September 30,
2010 2010
-------- --------
Deferred tax asset attributable to:
Net operating loss carryover $ 47,860 $ 41,388
Valuation allowance (47,860) (41,388)
-------- --------
Net deferred tax asset $ -- $ --
======== ========
NOTE 7 - RELATED PARTY TRANSACTION
As at December 31, 2010, there is a balance owing to an officer of the Company
in the amount of $5,000 (2009 - $5,908). This amount is included in accounts
payable.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities that become available. They may face a conflict in selecting
between the Company and other business interests. The Company has not formulated
a policy for the resolution of such conflicts.
NOTE 8 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about the Company's ability to continue as a going
concern. Without realization of additional capital, it would be unlikely for the
Company to continue as a going concern. The financial statements do not include
any adjustments that might result from this uncertainty.
The Company's activities to date have been supported by equity financing. It has
sustained losses in all previous reporting periods with an inception to date
loss of $217,546 as of December 31, 2010. Management continues to seek funding
from its shareholders and other qualified investors to pursue its business plan.
In the alternative, the Company may be amenable to a sale, merger or other
acquisition in the event such transaction is deemed by management to be in the
best interests of the shareholders.
NOTE 9 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through February 9, 2011, the date
these financial statements were issued, and has determined it does not have any
material subsequent events to disclose.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended
September 30, 2010 filed with the Securities and Exchange Commission on January
11, 2011, that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
In this quarterly report, unless otherwise specified, all dollar amounts are
expressed in United States Dollars and all references to "common shares" refer
to the common shares in our capital stock.
As used in this quarterly report, the terms "we", "us", "our company", mean
Liberty Coal Energy Corp., a Nevada corporation, unless otherwise indicated.
CORPORATE HISTORY
The address of our principal executive office is 99 18th Street, Suite 3000,
Denver, Colorado 80202. Our telephone number is 303.997.3161.
Our common stock is quoted on the OTC Bulletin Board under the symbol "LBTG".
We were incorporated on August 31, 2007 as "ESL Teachers Inc." under the laws of
the State of Nevada. Our original business plan was to develop and sell online
employment services specifically for both ESL Teachers and ESL operations
seeking to hire teachers worldwide. On March 15, 2010, we changed our name to
Liberty Coal Energy Corp. by way of a merger with our wholly owned subsidiary
"Liberty Coal Energy Corp." which was formed solely for the purpose of the
change of name. The change of name was to better represent the new business
direction of our company to that of a coal exploration, development and
production company.
In addition, on March 15, 2010, we effected a 30 for 1 forward stock split of
our authorized and issued and outstanding shares of common stock such that our
authorized capital increased from 50,000,000 shares of common stock, $0.001 par
value per share to 1,500,000,000 shares of common stock, par value $0.001 per
share.
Other than as set out herein, we have not been involved in any bankruptcy,
receivership or similar proceedings, nor have we been a party to any material
reclassification, merger, consolidation or purchase or sale of a significant
amount of assets not in the ordinary course of our business.
OUR CURRENT BUSINESS
Our primary business focus is to acquire, explore and develop coal properties in
North American. We are currently developing two properties, the Sheridan County
Project in Sheridan County, Wyoming and the Campbell Project in Campbell County,
Wyoming.
14
Our first project is the Sheridan County Project. On March 2, 2010, we entered
into a letter of agreement for the acquisition of private mineral leasehold
rights to certain coal mining properties in Sheridan County, Wyoming with
Rocking Hard Investment, LLC and Synfuel Technology, Inc. In consideration of
for the mineral leasehold, we paid $50,000 and are required to pay $25,000
within 90 days of the next three anniversary dates of the agreement.
Additionally, we must spend $2,750,000 on development of the property within
three years of the date of the agreement. As part of the agreement, we have also
agreed to enter into a royalty agreement with Rocking Hard pursuant to which
Rocking Hard would receive a royalty of $1.00 per ton of coal produced from the
property and sold with a maximum of $5,000,000. The maximum amount of royalty
must be paid within 15 years of the date of the agreement.
The second project is the Campbell Project. On February 1, 2010, we entered into
a lease agreement with Miller and Associates, LLC to acquire a 100% interest in
the project by issuing 100,000 post-split shares of common stock, an annual
payment of $20,000 adjusted annually by the CPI (consumer price index as
published by the US Government) according to this formula each year previous
payment times 1+ fractional CPI index. For example, if CPI is 3% the following
payment will be $20,000 x 1.03 or $20,600. In addition, we agreed to pay on the
25th day of each calendar month, for the right to mine all coal on the project a
production royalty of 4% of the gross sales price of all coal mined and sold
from the project.
We are an exploration stage company with limited operations and no revenues from
our business activities.
The following is a discussion and analysis of our plan of operation for the
quarter ended December 31, 2010, and the factors that could affect our future
financial condition and plan of operation.
GOING CONCERN CONSIDERATION
Our registered independent auditors included an explanatory paragraph in their
report on our financial statements as of and for the years ended September 30,
2010 and 2009, regarding concerns about our ability to continue as a going
concern.
Due to this doubt about our ability to continue as a going concern, management
is open to new business opportunities, which may prove more profitable to our
shareholders. Historically, we have been able to raise a limited amount of
capital through private placements of our equity stock, but we are uncertain
about our continued ability to raise funds privately. If we are unable to secure
adequate capital to continue our acquisition and exploration efforts, our
business may fail and our stockholders may lose some or all of their investment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2010 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 2009
The following summary of our results of operations should be read in conjunction
with our financial statements for the quarter ended December 31, 2010 which are
included herein.
The following table summarizes key items of comparison and their related
increase (decrease) for the three months ended December 31, 2010, and 2009:
Three Months Ended
December 31,
2010 2009
-------- --------
Amortization $ 422 $ --
General and administrative 845 1,013
Legal and accounting 4,282 500
Investor Relations 8,286 Nil
Consulting 15,000 Nil
Transfer agent -- 1,595
-------- --------
Net Loss $ 28,815 $ 3,108
======== ========
15
We had a net loss of $28,815 for the quarter ended December 31, 2010, which was
$25,707 greater than the net loss of $3,108 for the quarter ended December 31,
2009. The significant change in our results over the two periods is primarily
the result of increased activity related to the acquisition of our mineral
property interests.
PERIOD FROM INCEPTION, AUGUST 31, 2007 TO DECEMBER 31, 2010
Since inception, we have an accumulated deficit of $217,546. We expect to
continue to incur losses as a result of continued exploration and development of
our coal mining interests.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of December 31, 2010, reflects assets of $383,376. We had
cash in the amount of $26,046 and a working capital in the amount of $17,498 as
of December 31, 2010. We have sufficient working capital to enable us to carry
out our stated plan of operation for the next twelve months.
Three Months Three Months
Ended Ended
December 31, December 31,
2010 2009
-------- --------
Net Cash (Used in) Operating Activities $(33,144) $ (5,831)
Net Cash (Used in) Investing Activities -- Nil
Net Cash Provided by Financing Activities -- Nil
-------- --------
Increase (Decrease) in Cash $(33,144) $ (5,813)
======== ========
Our current cash requirements are significant due to planned exploration and
development of our current coal mining property interests, and we anticipate
generating losses. In order to execute on our business strategy, including the
exploration and development of our current coal interest, we will require
additional working capital, commensurate with the operational needs of our
planned projects and obligations. Our management believes that we should be able
to raise sufficient amounts of working capital through debt or equity offerings,
as may be required to meet our short-term obligations. However, changes in our
operating plans, increased expenses, acquisitions, or other events, may cause us
to seek additional equity or debt financing in the future. We anticipate
continued and additional operations on our properties. Accordingly, we expect to
continue to use debt and equity financing to fund operations for the next twelve
months, as we look to expand our asset base and fund exploration and development
of our properties.
There are no assurances that we will be able to raise the required working
capital on terms favorable, or that such working capital will be available on
any terms when needed. Any failure to secure additional financing may force us
to modify our business plan. In addition, we cannot be assured of profitability
or continued operations in the future.
OPERATING ACTIVITIES
Net cash flow used in operating activities during the three months ended
December 31, 2010 was $33,144, an increase of $27,331 from the $5,813 net cash
outflow during the three months ended December 31, 2009.
INVESTING ACTIVITIES
The primary driver of cash used in investing activities in previous periods was
capital spending in the acquisition of coal properties.
Cash used in investing activities during the three months ended December 31,
2010 was $Nil, which resulted in no change from the $Nil cash used in investing
activities during the three months ended December 31, 2009.
16
FINANCING ACTIVITIES
Financing activities during the three months ended December 31, 2010, provided
$Nil, which resulted in no change from the $Nil cash used in financing
activities during the three months ended December 31, 2009.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
MANAGEMENT CERTIFICATION
The financial statements herein are certified by the officers of the Company to
present fairly, in all material respects, the financial position, results of
operations and cash flows for the periods presented in conformity with
accounting principles generally accepted in the United States of America,
consistently applied.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and amounts due to Company
stockholder.
The carrying amount of these financial instruments approximates fair value due
either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these financial statements. It is
management's opinion that the Company is not exposed to significant interest,
currency or credit risks arising from its other financial instruments and that
their fair values approximate their carrying values except where separately
disclosed.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles of the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
MINERAL PROPERTIES
Costs of exploration, carrying and retaining unproven mineral lease properties
are expensed as incurred. Mineral property acquisition costs are capitalized
including licenses and lease payments. Although the Company has taken steps to
verify title to mineral properties in which it has an interest, these procedures
do not guarantee the Company's title. Such properties may be subject to prior
agreements or transfers and title may be affected by undetected defects.
Impairment losses are recorded on mineral properties used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
LOSS PER SHARE
Basic loss per share is calculated using the weighted average number of common
shares outstanding and the treasury stock method is used to calculate diluted
earnings per share. For the years presented, this calculation proved to be
anti-dilutive.
DIVIDENDS
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid during the period shown.
17
INCOME TAXES
The Company provides for income taxes using an asset and liability approach.
Deferred tax assets are reduced by a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. No provision for income taxes is
included in the statement due to its immaterial amount, net of the allowance
account, based on the likelihood of the Company to utilize the loss
carry-forward. See Note 5.
NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number of
common shares outstanding and common stock equivalents, if not anti-dilutive.
The Company has not issued any potentially dilutive common shares.
RECENT ACCOUNTING PRONOUNCEMENTS
VARIABLE INTEREST ENTITIES
In June 2009, the FASB issued changes to require an enterprise to perform an
analysis to determine whether the enterprise's variable interest or interests
give it a controlling financial interest in a variable interest entity; to
require ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity; to eliminate the quantitative
approach previously required for determining the primary beneficiary of a
variable interest entity; to add an additional reconsideration event for
determining whether an entity is a variable interest entity when any changes in
facts and circumstances occur such that holders of the equity investment at
risk, as a group, lose the power from voting rights or similar rights of those
investments to direct the activities of the entity that most significantly
impact the entity's economic performance; and to require enhanced disclosures
that will provide users of financial statements with more transparent
information about an enterprise's involvement in a variable interest entity. The
guidance became effective for the Company on February 1, 2010. The adoption of
the guidance did not have an impact on the Company's consolidated financial
statements.
CODIFICATION OF GAAP
In June 2009, the FASB issued guidance to establish the Accounting Standards
Codification TM ("Codification") as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in
the preparation of financial statements in conformity with GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative GAAP for SEC registrants. The FASB will no longer
issue new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards
Updates ("ASU"). ASUs will not be authoritative in their own right as they will
only serve to update the Codification. The issuance of SFAS 168 and the
Codification does not change GAAP. The guidance became effective for the Company
for the period ending October 31, 2009. The adoption of the guidance did not
have an impact on the Company's consolidated financial statements.
SUBSEQUENT EVENTS
On July 31, 2009, the Company adopted changes issued by the FASB that
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. Specifically, the guidance sets forth the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. The
Company has evaluated subsequent events through the date the financial
statements were issued.
18
BUSINESS COMBINATIONS
The Company adopted the changes issued by the FASB that requires the acquiring
entity in a business combination to recognize all (and only) the assets acquired
and liabilities assumed in the transaction; establishes the acquisition-date
fair value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose additional information needed to
evaluate and understand the nature and financial effect of the business
combination.
The Company also adopted the changes issued by the FASB which requires assets
and liabilities assumed in a business combination that arise from contingencies
be recognized on the acquisition date at fair value if it is more likely than
not that they meet the definition of an asset or liability; and requires that
contingent consideration arrangements of the target assumed by the acquirer be
initially measured at fair value.
The guidance is effective for the Company's acquisitions occurring on or after
February 1, 2009. The Company applied these new provisions to two acquisitions
that occurred during the year, Rock Coast Media, Inc. and Pixel Bridge, Inc.
These acquisitions are more fully disclosed in Note 5 in our Consolidated
Financial Statements.
NON-CONTROLLING INTERESTS
In December 2007, the FASB issued changes to establish accounting and reporting
standards for all entities that prepare consolidated financial statements that
have outstanding non-controlling interests, sometimes called minority interest.
These standards require that ownership interests in subsidiaries held by outside
parties be clearly identified, labeled and presented in equity separate from the
parent's equity; the amount of net income attributable to the parent and the
non-controlling interest be separately presented on the consolidated statement
of income; accounting standards applied to changes in a parent's interest be
consistently applied; fair value measurement upon deconsolidation of a
non-controlling interest be used; and the interests of the non-controlling
owners be already identified and distinguished. The adoption of this guidance
had no impact on the Company's consolidated financial statements.
INTANGIBLE ASSETS
In April 2008, the FASB adopted changes to require companies estimating the
useful life of a recognized intangible asset to consider their historical
experience in renewing or extending similar arrangements or, in the absence of
historical experience, to consider assumptions that market participants would
use about renewal or extension as adjusted for entity-specific factors. The
guidance is effective for fiscal years beginning after December 15, 2008 and is
to be applied prospectively to intangible assets whether acquired before or
after the effective date. The Company adopted the guidance on February 1, 2009.
The adoption had no impact on the Company's consolidated financial statements.
HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")
In May 2008, the FASB issued changes to identify the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP (the GAAP hierarchy). The guidance is
effective 60 days following the SEC's approval of the Public Company Accounting
Oversight Board amendments to AU section 411, THE MEANING OF PRESENT FAIRLY IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Management is
currently evaluating the guidance and assessing the impact, if any, on the
Company's consolidated financial statements.
REVENUE RECOGNITION
In September 2009, the FASB issued new revenue recognition guidance on multiple
deliverable arrangements. It updates the existing multiple-element revenue
arrangements guidance currently included under the Accounting Standards
Codification ("ASC") 605-25. The revised guidance primarily provides two
significant changes: 1) eliminates the need for objective and reliable evidence
of the fair value for the undelivered element in order for a delivered item to
be treated as a separate unit of accounting, and 2) requires the use of the
relative selling price method to allocate the entire arrangement consideration.
In addition, the guidance also expands the disclosure requirements for revenue
19
recognition. ASU 2009-13 will be effective for the first annual reporting period
beginning on or after fiscal 2011, with early adoption permitted provided that
the revised guidance is retroactively applied to the beginning of the year of
adoption. Management is currently evaluating the impact of adopting this
guidance on the Company's consolidated financial statements.
RECLASSIFICATIONS
Certain balances in the prior years have been reclassified to conform to the
current year presentation.
REVENUES
We have not generated revenues since inception.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting issuer", we are not required to provide the information
required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND PROCEDURES
Our management evaluated, with the participation of our chief executive officer
and chief financial officer (our principal executive officer, principal
financial officer and principal accounting officer), the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of
the period covered by this quarterly report. Based on this evaluation, our chief
executive officer and our chief financial officer (our principal executive
officer, principal financial officer and principal accounting officer) concluded
that our disclosure controls and procedures are effective as of December 31,
2010 to ensure that information we are required to disclose in reports that we
file or submit under the Securities Exchange Act of 1934 (i) is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and (ii) is accumulated
and communicated to our management, including our chief executive officer and
our chief financial officer (our principal executive officer, principal
financial officer and principal accounting officer), as appropriate, to allow
timely decisions regarding required disclosure. Our disclosure controls and
procedures are designed to provide reasonable assurance that such information is
accumulated and communicated to our management. Our disclosure controls and
procedures include components of our internal control over financial reporting.
Management's assessment of the effectiveness of our internal control over
financial reporting is expressed at the level of reasonable assurance that the
control system, no matter how well designed and operated, can provide only
reasonable, but not absolute, assurance that the control system's objectives
will be met.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal controls over financial reporting
that occurred during the period covered by this quarterly report, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered beneficial shareholder, is an adverse
party or has any material interest adverse to our interest.
20
ITEM 1A. RISK FACTORS
Not Applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. [REMOVED AND RESERVED]
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit No. Description
----------- -----------
(3) (I) ARTICLES OF INCORPORATION; AND (II) BY-LAWS
3.1 Articles of Incorporation (Incorporated by reference to our
Registration Statement on Form SB-2 originally filed on January 23,
2008).
3.2 By-laws (Incorporated by reference to our Registration Statement on
Form S1/A filed on February 27, 2008).
3.3 Articles of Merger (Incorporated by reference to our Current Report on
Form 8-K filed on March 29, 2010).
3.4 Certificate of Change (Incorporated by reference to our Current Report
on Form 8-K filed on March 29, 2010).
(10) MATERIAL CONTRACTS
10.1 Mineral and Mining Lease with Miller and Associates LLC dated February
1, 2010. (Incorporated by reference to our Current Report on Form 8-K
filed on February 10, 2010).
10.2 Letter of Agreement with Rocking Hard Investment, LLC and Synfuel
Technology, Inc. dated March 2, 2010 (Incorporated by reference to our
Current Report on Form 8-K filed on March 4, 2010).
10.3 Letter Agreement with Rocking Hard Investment, LLC and Synfuel
Technology, Inc., dated March 2, 2010 (Incorporated by reference to our
Current Report on Form 8-K filed on March 4, 2010).
(31) RULE 13A-14(A)/15D-14(A) CERTIFICATIONS
31.1* Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32) SECTION 1350 CERTIFICATIONS
32.1* Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 .
----------
* Filed herewith
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIBERTY COAL ENERGY CORP.
Date: February 11, 2011
/s/ Edwin G. Morrow
---------------------------------------------
EDWIN G. MORROW
President, Chief Executive Officer, Chief
Financial Officer, Secretary, Treasurer and
Director (Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
2